The growing capabilities of platforms

In an environment for greater expectations of highly personalised customer service and challenges from emerging trends such as ‘robo-advice’, it’s never been more important for financial advisers to uncover new opportunities to service clients and cut down on the time taken to manage portfolios.

Advances in technology are helping to make this happen.

Online share trading via platforms

Advisers are already very familiar with the benefits of platforms, including the convenience of being able to administer a client’s entire portfolio with just a few key strokes.

Platforms are now extending their capabilities with simpler online trading functionality.

This means financial advisers are finding it easier to compete with stockbrokers and online broking houses for the business of purchasing direct shares. So much so, in fact, that share trading is quickly becoming an integral component of the service offered by financial advisers.

A renewed interest in direct shares

New platform capabilities are also coinciding with a renaissance in direct share ownership – something that had waned following the introduction of compulsory super contributions in the early 90s.

One reason has been the current low interest rate environment prompting investors to search out potentially better yielding equities to provide an income above what can be achieved from term deposits.

Coupled with this has been a surge in SMSFs for investors seeking extra control of their investment choices. For these clients direct share investments are a familiar and comfortable way to control their investments, and much of the appeal of SMSFs has been in the ability to choose ASX listed shares.

However the ability to buy shares directly within super accounts held via platforms, such as IOOF Pursuit, is providing an alternative to SMSFs that avoids the cost and administrative burden of establishing and running an SMSF.

Benefits of share ownership inside super

Holding direct shares via super offers many benefits for clients, perhaps most significantly in the form of considerable tax savings. Buying shares directly inside a client’s super fund reduces the tax paid on the capital gains made by that investment when compared with holding them outside of superannuation. For example, CGT inside super is only 10 per cent for assets held more than one year – against a CGT liability of up to 24.5 per cent when the same asset is held outside super.

While platforms are simplifying the process of buying shares inside super, what is less well known is that existing share holdings can be brought into a super fund via an off-market transfer. While this changes ownership of the shares from your client to the trustee of the super fund, potentially triggering a capital gain or loss event, any loss can be offset against other capital gains made that year – and future capital gains are taxed at the preferential rate that super enjoys.

While holding shares outside super until retirement will lower a CGT bill (upon ultimate disposal) when compared to the marginal tax rate of the client immediately prior to retirement, it’s important to remember that for clients who are reinvesting dividends (effectively a CGT event), the lower CGT bill inside super will see more reinvestment, effectively taking more advantage of the compounding nature of the investment.

There are also Centrelink advantages for holding shares in super, particularly for couples with an age difference. For example, if one spouse is 65 and the other is 57, and their joint super is in accumulation phase (based on the younger spouse's age) it won’t be considered an asset for Centrelink purposes.

This is particularly relevant following asset test changes coming from 1 January 2017.

Making it easy for advisers to trade online

IOOF Pursuit recently introduced a number of enhancements that transform the way advisers transact online.

With the convenience of transacting on all investments in one place, simultaneous buy/sells, straight-through-processing and built-in validations, advisers can trade on their clients’ accounts quickly and efficiently.

When it comes to share trading, advisers have the ability to view contract note details in real time and make income elections (eg cash or DRP) as they make new share purchases. And by utilising features such as selling multiple shares in a single order, advisers can streamline an often onerous task of periodically rebalancing a portfolio.

To learn more about IOOF Pursuit’s online trading enhancements please speak to your local IOOF BDM.

The information contained in this newsletter is provided on behalf of the IOOF group of companies and is intended for financial adviser use only. It is given in good faith and has been prepared based on information that is believed to be accurate and reliable at the time of publication. Any examples are for illustration purposes only and are based on the continuance of present laws and our interpretation of them at the time.